New Delhi: The Centre, responding to a plea in the Kerala High Court challenging airline fare hikes during festival seasons, affirmed on Friday that airlines have the autonomy to set airfares based on their operational viability.
The government emphasised that it refrains from intervening in the commercial aspects of airlines or the fixation of airfares.
In an affidavit, the Union government highlighted that dynamic pricing, a global practice adopted by airlines, plays a crucial role in optimising revenue per flight. This approach involves algorithms that consider factors such as competitor pricing, supply and demand, and other external elements.
"Airlines are free to charge airfares as per their operational viability. The government does not interfere either in commercial aspects of the airline or fixing of airfare by them," the affidavit stated.
The government underscored that airlines are obligated to establish reasonable tariffs under Rule 135 of the Aircraft Rules, 1937. This rule requires considerations such as the cost of operation, service characteristics, reasonable profit, and the prevailing tariff.
Addressing the dynamics of dynamic pricing, the affidavit explained that it is a strategy where prices change based on current market demands, considering factors like the day of the week, time of day, and days before the flight. This practice enables businesses to stay competitive by adjusting prices based on various components.
"Dynamic pricing is a global pricing strategy in which highly flexible prices for products or services are based on current market demands. Businesses are able to stay competitive by changing prices based on algorithms that take into account competitor pricing, supply and demand, and other external factors," it noted.
The government clarified that passengers booking closer to the travel date may not secure lower fares, as inventory earmarked for such prices may have already been booked. In emergency situations, the affidavit assured that the union government does not remain a silent observer.
Regarding airfares on the international front, the government attributed the stability to factors such as the opening of markets post-COVID, a surge in demand, rising global ATF prices, and disruptions in the supply chain due to the COVID pandemic and the Ukraine-Russia conflict.
The affidavit concluded by stating that the Competition Commission of India (CCI) monitors airlines to prevent anti-competitive practices and ensure fair competition in adherence to the Competition Act.